How Brazil Overtook the UK Economically

The National is a newspaper based in Abu Dhabi. I’ve been writing occasional business pieces for them from Brazil for just over a year.

The latest came out today and is a broad piece that seeks to explain how Brazil managed to overtake the United Kingdom as the world’s sixth biggest economy. Read the whole story here.

It’s a big subject and hard to cover in 900 words but I identify two basic reasons for the turnaround.

The huge increase in commodities production for hungry markets such as China and India, and a series of smart economic policies that have tamed inflation, helped cut inequality, and fostered a big upturn in domestic consumption, particularly among the country’s poor.

The first part is mostly luck. The second part is thanks to Brazil’s last two presidents.

For years now I have been arguing with leftists who think that all Brazil’s progress is down to Lula and conservatives who say none of this was possible without his predecessor Fernando Henrique Cardoso.

They are both right, but most of them are too stubborn or short-sighted to give the other a share of the credit. As I say in the piece:

The foundations were laid at the second half of the 1990s by the former president Fernando Henrique Cardoso, who introduced a stable new currency and tamed inflation that reached 1,477 per cent a year at its peak.

His successor, Luiz Inacio Lula da Silva, built on that base and sped up moves to reduce inequality. Mr Lula expanded the Bolsa Familia programme that gives a monthly stipend to poor families who ensure their children stay in school and today more than 13 million households rely on the handout.

At the same time, Lula bumped up the minimum wage and created jobs, reducing unemployment from 13 per cent in 2004 to less than 5 per cent today. All told, more people – and particularly the poor – have more money to spend, giving a significant fillip to internal production and the domestic market.

Brazilians were understandably delighted at overtaking the UK and they are right to celebrate what is a remarkable achievement.

But they shouldn’t get too excited. Brazil needs to improve its record on crime, infrastructure, human rights, public transport and a host of other social measures, especially inequality.

Hi Andrew, Great blog! When I left Brazil to the UK in 2001 – I could never imagined that a country could change so much in such short period of time! Although, BR still has a long way to go in terms of social equality, at least people are having more access to education and basic state welfare (bolsa-familia).